First monitoring feedback complete

Amongst the comments we’ve seen in recent days, we’ve seen a challenge for us to give advisers more guidance on what we expect from them.
That process started some weeks back when a small group of the first AFAs were asked to send us their Adviser Business Statements.
To recap, the ABS is intended as an efficient way for you to record evidence that you’ve thought about your obligations and for FMA to understand the business you do. It’s important to emphasise that the ABS does not represent our entire monitoring methodology. It’s just one tool.
Our early monitoring work, including ABS reviews, has two objectives:
1. Assess the range of advisers and advice practices in the industry, so that we can prioritise our future monitoring work and resources
2. While regulation is new, many advisers will need additional help to understand exactly what the obligations mean. Making the expectations clear and ensuring advisers understand the next steps they need to take are important investments we are making in the early stages of this brand new regime.
We have just completed a review of the first batch of ABSs, and in the main it has achieved what we wanted. At this stage of the regime, an ABS is a window into how an adviser interprets and performs their legal and professional responsibilities. Our initial selection covered a wide range of business models, including AFAs who don't spend all their time providing retail investment advice.
Generally advisers have responded constructively and in good faith to the feedback. If you were one of those advisers, thank you. Your attitude speaks to your engagement with the new regime and is likely to result in a smooth relationship with the regulator.
Overall the documents gave us good information, though some, perhaps through efforts to be succinct, had compliance gaps or did not do justice to what is actually happening in their business. How advisers deliver their advice/service is the key point, so we asked for more information on this in most cases.
Discussions with the first group of advisers about their ABS helped fill in these types of gaps and allowed us to complete the assessment. We trust it has also given the advisers a better understanding of the sort of processes we’re looking for the document to describe.
To most of the first advisers selected we've said, 'thanks and bye for now', letting them get on with running their businesses.
We intend to provide wider feedback to the AFA industry once we've reviewed a few more ABSs.
Mel Hewitson

Comments from our readers

On 14 July 2011 at 10:40 am Alison said:

It is a mystery to me why the FMA is concentrating on "how advisors deliver their advice/service". Wasn't that the whole point of Standard Set C ? Didn't we all spend hours demonstrating to ETITO that our "advice/service" process met the required standard? Does the FMA understand what was involved in SSC ?

Why don't they just access advisor's SSC papers rather than asking them to repeat the process ?

On 14 July 2011 at 6:26 pm Mel Hewitson said:

Hi Alison

You have asked this same question before, to which I replied:

You may recall Ross Butler, Chair of the Code Committee saying that getting the ticket to the game is just the beginning and it’s how you play the game that then counts.

Once you’re an AFA and get close to the end of your initial 5 year (typical term) licence, FMA will consider your application for licence renewal.

Before FMA can renew your licence, we have a statutory responsibility to be satisfied that you have actually complied with the Act, the terms & conditions and the Code during the five years since your initial licence was granted.

In summary:

- Passing competency assessments shows us you can do it.

- Your ABS tells us how you do it.

- A visit by FMA will tell us whether you are doing it.

I hope this helps.

On 15 July 2011 at 10:44 am Alison said:

Mel, I quite agree with all you are saying here: before advisors can be granted a licence renewal they need to show they have complied with the Act/Code.

But instead of "once you get close to the initial 5 year licence", the FMA seems to be checking up on people with 5 months - or even 5 weeks - of their authorisation.

On 19 July 2011 at 12:58 pm Sarah said:

Alison, it ain't gonna go away, so get on with it. Most people are 'just getting on with it'. Why can't you?

On 19 July 2011 at 2:17 pm Peter Barker said:

Can I ask one thing Mel, please stop calling it a regime, it has all the implications of a totalitarian Mugabesque dictatorship. Not a good way to get the natives on board.

On 21 July 2011 at 1:33 pm Mel Hewitson said:

Hi Peter

How about 'new professional era'? I agree the tone should be positive.

Cheers

Mel

On 22 July 2011 at 10:46 am Peter Barker said:

Mel, that sounds perfect to me.

Thanks for that, I feel uplifted already.

Peter

On 26 July 2011 at 8:21 am Paraqnormal said:

No I think "regime" is more accurate. A huge imposition of Mugabesque bureaucracy for no real gain to the consumer is a very accurate description.